Andrey Rogachev v Mikhail Goryainov
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morris |
| Judgment Date | 14 June 2019 |
| Neutral Citation | [2019] EWHC 1529 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: QB/2018/000709 |
| Date | 14 June 2019 |
[2019] EWHC 1529 (QB)
Mr Justice Morris
Case No: QB/2018/000709
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Philip Coppel QC and James Shirley (instructed by Edwin Coe LLP) for the Claimant
Jonathan Nash QC and William Edwards (instructed by White & Case LLP) for the Defendant
Hearing dates: 20 and 21 March 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
On 21 December 2018 on the without notice application of Mr Andrey Rogachev (“the Claimant”), Mr Justice Stewart granted a worldwide freezing injunction against Mr Mikhail Goryainov (“the Defendant”) until the return date of 15 January 2019, restraining the Defendant from removing any assets within the jurisdiction up to the value of £9 million or in any way disposing of, dealing with or diminishing the value of any of his assets whether in or outside England and Wales up to the same value (“the Freezing Injunction”). The assets restrained include specifically the sale proceeds of a property known as Volgogradskiy Prospect 177 in Moscow (“V177”), if it has been sold. The order was continued with variations by further orders of 21 January 2019 and 26 February 2019.
There are now before me three applications. The first two applications were considered at an oral hearing on 20 and 21 March 2019 and are as follows:
(1) An application by the Claimant, made by application notice dated 14 January 2019, for an order that the Freezing Injunction be continued until further order; and
(2) An application by the Defendant, by application notice dated 12 March 2019, that the Freezing Injunction be revoked and discharged. The Defendant further applies for an order that the Claimant provide the Defendant's solicitors with a full and accurate list of each and every person who has been informed of the Freezing Injunction, and that the Defendant have liberty to apply for an enquiry as to the damages on the Claimant's undertaking in schedule B to the injunction.
Since the hearing in March 2019, the Claimant has applied, by further application notice dated 2 April 2019, for an interim proprietary injunction, in lieu of the Freezing Injunction, restraining the Defendant from transferring ownership or control of, or dealing with, V177. Whilst the injunction sought by this further application is based on contractual, as well as proprietary rights, for ease of reference, and by way of contrast to the Freezing Injunction, I refer to it as “the Proprietary Injunction”.
The parties' cases in outline
The Defendant contends as follows:
(1) The Freezing Injunction should be discharged for a series of overlapping reasons:
(a) There was no justification for the application to Stewart J having been made without notice;
(b) The Claimant does not have a good arguable case for damages or equitable compensation in the amount identified in the Freezing Injunction or at all;
(c) When making the application to Stewart J, the Claimant was in breach of his duty of full and frank disclosure;
(d) There is (and was) no real risk of dissipation;
(e) The grant of a Freezing Injunction is not appropriate in all the circumstances.
(2) In any event the Freezing Injunction should not be continued, for the same reasons as in (1)(b), (d) and (e).
(3) Further, there is no basis for the grant of an interim proprietary injunction in lieu of the Freezing Injunction.
The Claimant contends as follows:
(1) The Freezing Injunction should be continued, and not discharged; or in any event should be granted afresh.
(2) Alternatively, if no freezing injunction is warranted, there should be an interim proprietary injunction restraining dealings with V177.
The Evidence
The principal evidence before me is the Claimant's first affidavit dated 24 December 2018 and a witness statement of Roger Kennell dated 20 December 2018 in support of the without notice application; the Defendant's first witness statement and a witness statement from Mr Artem Bukin, both dated 12 March 2019; the Claimant's first witness statement dated 15 March 2019 responding to the Defendant's witness statements and, now, in relation to the Proprietary Injunction, a second witness statement from Mr Bukin dated 26 April 2019.
In this judgment, I address first the factual background, and then, deal in turn with the Freezing Injunction and the application for the Proprietary Injunction.
The Factual Background
The Claimant is a Russian businessman with investments in retail and real estate sectors. He is currently a member of the supervisory board of a group of companies running a supermarket chain in Russia. M1 Managing Company LLC (“M1”) is a company which has been and is involved in the operation of three of the four operational markets (as described below). Mr Ilya Sinitysin is M1's chief financial officer.
The Defendant is a Russian businessman whose investments are primarily in real estate. He controls Gremm Group, a Russian real estate group. Mr Bukin is currently chief development officer at Gremm Group.
In late 2013 the Claimant and the Defendant agreed to enter upon a joint business to develop and operate farmers' markets in Moscow. That joint business (“the Joint Venture”) was to comprise at least five market sites, namely; V177, a former car factory in Volgogradskiy Prospect, Moscow; three currently established and operating undercover markets in Moscow, known respectively as K25, K24 and LB30; and a further currently established and operating undercover market known as Usachevskiy Market.
This initial overall joint venture agreement made in January or February 2014 provided the agreed framework under which the Claimant and the Defendant could acquire individual sites, with each site separately acquired, developed and thereafter operated as a market. In mid-January 2014, the Claimant instructed lawyers to draft a shareholders' agreement which would, when put in place, govern the corporate holding structure for the Joint Venture and accommodate the acquisition of separate sites. At that time the Claimant and the Defendant anticipated that the corporate holding structure and shareholders' agreement would be in place within a matter of months, before the acquisition of specific sites under the Joint Venture. In fact the drafting of the agreement and establishing the corporate structure took considerably longer and it was not until 26 June 2015 that the Shareholders Agreement was executed. In the meantime progress on the Joint Venture had moved at a faster pace.
More generally, each party was to own 50% of the joint business. They would share 50% of the costs, including the costs of acquiring developing and operating the markets, and 50% of the returns. The funding for the joint business was provided by companies controlled by each of the parties. There is no dispute that the amount contributed by companies controlled by the Claimant (US $29.5 million) was approximately US $9 million more than that contributed by companies controlled by the Defendant (US $20.2 million).
Four of the five sites are operational. The operating company for three of those four sites was and is M1. Although there is a dispute as to the historic position, there is no dispute that M1 de facto now acts on the Claimant's instructions. Thus, the Claimant is in de facto control of three operational sites, namely K24, K25 and LB30 and the income they produce.
V177 Agreement
The Claimant's claim centres upon the V177 site. In about February 2014 the Claimant and the Defendant agreed that they would acquire V177 by purchasing the two corporate owners of the units which comprised the site (OJSC Moskvich Servis and LLC Rolvent) and then develop the site for use as a market.
By the Particulars of Claim, the Claimant alleges that an initial agreement concerning V177 was reached on 10 February 2014 and that on 7 July 2014 the terms of that agreement were modified. The express and implied terms of the V177 Agreement (as modified) and the breaches of those terms, as alleged by the Claimant, are set out in paragraphs 69 to 74 below. In essence, V177 was to be transferred by the Defendant to a holding company within the corporate group structure, once established.
By 3 March 2014 the Defendant had made the first payment towards the acquisition of V177 and by 20 March 2014, the Defendant had acquired the two companies and then transferred V177 into a new company, Pigmalion LLC, a company, registered in the name of the Defendant's father, and controlled by the Defendant. By the summer of 2014 preparatory work was underway in relation to V177.
In October 2014 the Defendant asked the Claimant to contribute 50% of the cost of acquiring V177 that had been incurred by that stage by the Defendant. This was done by way of a payment between companies controlled respectively by the two individual parties. Accordingly on or about 11 November 2014 a payment of US $10,953,170 was made by Gerthing Limited (the Claimant's company) to Shannon Finance Limited (the Defendant's company) by way of a loan, the terms of which formally deferred repayment for 15 years, but on the basis that the loan would in fact be forgiven.
At a meeting on 17 December 2014 it was agreed that renovation works would start in February 2015. On 30 December 2014 Pigmalion became the registered owner of the whole of V177.
The Shareholders Agreement
The Shareholders Agreement (“SHA”) executed 26 June 2015 provided for the transfer into the corporate holding structure of each of the companies which held each of the markets. Under that Agreement, the corporate...
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